USTR proposes modifications to LNG tanker and vehicle carrier actions

On June 6, 2025, the Office of the United States Trade Representative (USTR) announced a Notice of Proposed Modification of Action in Section 301 Investigation of China’s Targeting the Maritime, Logistics and Shipbuilding Sectors for Dominance (the Proposed Modification).

The Proposed Modification includes substantive revisions to Annexes III and IV of the USTR’s Notice of Action and Proposed Action in Section 301 Investigation of China’s Targeting the Maritime, Logistics and Shipbuilding Sectors for Dominance, Request for Comments (the Notice), concerning foreign-built vehicle carriers (Annex III) and LNG-vessels (Annex IV). The USTR simultaneously initiated the public comment process regarding the Proposed Modification, with public comments due by July 7, 2025.

Summary of the proposed modification

The proposed modification:

• Proposes the following changes to Annex III:
  • Adds a “targeted coverage provision” exempting certain non-US built vehicle carriers providing certain services to the US government from the Annex III service fees
  • Changes the basis of the Annex III service fee to net tons of the arriving vehicle carrier (instead of car equivalent units (CEU)) and revises the amount of the Annex III service fee
  • Clarifies that the term “vehicle carrier” includes roll-on/roll-off vessels
• Proposes the following changes to Annex IV:
  • Removes USTR’s ability to direct the suspension of LNG export licenses for failure to comply with the Annex IV restrictions
  • Reassigns the data reporting requirements in Annex IV to vessel operators (instead of LNG terminal operators, as was the case previously)
• Solicits public comments regarding
  • For Annex III:
    • The potential impact of a fee based on net tons
    • The suggested amount of the fee
    • Implications of a targeted coverage provision for the Maritime Security Program and suggested duration for such targeted coverage
  • For Annex IV:
    • The potential impact of eliminating the term providing for suspension of export licenses in Annex IV
    • The suitability of applying Annex IV data collection requirements to vessel operators or owners, or, if neither is suitable, seeking input as to what other entity may be appropriate
    • The suitability of applying Annex IV restrictions to vessel owners or operators, or, if neither is suitable, seeking input as to what other entity may be appropriate

The Proposed Modification follows recent hearings regarding Annex V of the Notice. Annex V proposes tariffs on certain Chinese shipping equipment, including ship-to-shore cranes. The Proposed Modification specifically notes that “[p]otential modifications concerning [the products addressed in Annex V] may be addressed in a separate notice.” Nevertheless, the Proposed Modification does not address any potential changes to Annex I, concerning service fees for Chinese owned or operated vessels, or Annex II of the Notice, concerning service fees for Chinese-built vessels.

Procedural background of the notice

The USTR published the Notice in response to the USTR’s investigation initiated under Section 301 of the Trade Act of 1974 (Section 301). Section 301 empowers the USTR to take actions which are determined “appropriate and feasible” to obtain the elimination of any acts, policies or practices of a foreign country which are found to be “unreasonable or discriminatory and burden or restrict US commerce” under a Section 301 investigation.

On January 16, 2025, the USTR’s Section 301 Investigation of China’s Targeting the Maritime, Logistics and Shipbuilding Sectors for Dominance (the Investigation) determined that “China’s targeting of the maritime, logistics and shipbuilding sectors for dominance is unreasonable and burdens or restricts US commerce” and is thus actionable.

On February 21, 2025, the USTR published its initial proposed actions under Section 301 to address the findings of the Investigation (the Initial Proposal). Following the publication of the Initial Proposal, the USTR solicited and accepted public comments on the Initial Proposal and held a two-day public hearing on March 24 and 26, 2025 (the Initial Hearings).

On April 9, 2025, the White House released Executive Order 14269, “Restoring America’s Maritime Dominance” (the Order). The Order specifically instructed the USTR to consider additional tariffs on Chinese shipping equipment, which USTR subsequently added to the Notice as Annex V.

On April 17, 2025, pursuant to Section 301, the USTR issued the Notice, which was subsequently published in the Federal Register on April 23, 2025. The Notice contained (i) the USTR’s determination of “appropriate and feasible” actions (substantively included in Annexes I, II, III and IV); and (ii) the Annex V proposal, proposed in response to the Order.

On May 19, 2025, the USTR conducted a public hearing regarding the Annex V proposal, specifically concerning tariffs on Chinese shipping equipment (the Annex V Hearing). Because Annexes I, II, III and IV of the Notice were determined appropriate and feasible by the USTR in light of the public comments and Initial Hearings on the Initial Proposal, USTR determined that the substance of those Annexes was “outside the scope of the public comment process established [for the Annex V Hearing].”¹ Post-hearing written comments were accepted by the USTR until May 27, 2025. The USTR has not yet announced its determinations regarding the Annex V proposal.

Notwithstanding the determinations made by the USTR concerning Annexes I, II, III and IV of the Notice, Section 307 of the Trade Act of 1974 provides that the USTR may modify or terminate any action no longer determined to be appropriate. In the context of the Proposed Modification, the USTR provided that the actions may no longer be determined to be appropriate if they:

• May result in impairments to other key US interests
• May not reduce dependencies on China in the maritime, logistics, and shipbuilding sectors
• May present administrability concerns

In the case of Annex III, the USTR explained the revisions were made to “provide for targeted coverage for a specific program that reduces dependence on China” and “to address administrability and … potential for fee evasion.” In the case of Annex IV, the USTR noted it proposed the modifications “in order to allay concerns about the provision’s impact on the US LNG sector.”

The Proposed Modification

Proposed modifications of Annex III

Targeted coverage provision

The Proposed Modification proposes the addition of a “targeted coverage provision” to Annex III. The targeted coverage provision would exempt the following vessels from the Annex III service fee:

• US-owned or US-flagged vessels enrolled in the Maritime Security Program
• US government vessels
• US government cargo

For the purposes of the Annex III targeted coverage exemption for US government vessels, a “US government vessel” is any vessel either owned and operated (i) directly by the US Government or (ii) for the US Government by an agent or contractor, including privately owned US-flag vessel under bareboat charter to the US Government.

Changing the basis of the Annex III service fee

The Proposed Modification proposes replacing the basis for assessing the Annex III service fee. The prior service fee calculations were based on car equivalent units (CEU) and the assessed fee was US$150.00 per CEU “capacity of the entering non-US built vessel.” The Proposed Modification replaced the basis of CEUs with the net tonnage of the entering non-US built vessel and revised the Annex III service fee to be US$14.00 per ton “for the arriving non-US built Vehicle Carrier.”

Inclusion of roll-on/roll-off vessels

The Proposed Modification clarifies that the term “Vehicle Carrier” within Annex III does include “Roll-On / Roll-Off Vessels.”

Modification of Annex IV

The removal of USTR’s ability to direct the suspension LNG export licenses

The Proposed Modification struck the language empowering the USTR to direct the suspension of LNG export licenses. Previously, Annex IV of the Notice included language that the USTR could “direct the suspension of LNG export licenses” if the requirements set out in Annex IV with respect to LNG exports made via US-built, US-flagged and US-operated vessels are not met. However, the Proposed Modification proposes the removal of this USTR prerogative. As of the date of the Proposed Modification, there is no proposed alternative enforcement mechanism.

The application of data reporting requirements to LNG vessel operators

As currently drafted, the Proposed Modification proposes shifting LNG vessel reporting requirements under Annex IV from US LNG terminal operators to LNG vessel operators. Previously, Annex IV of the Notice had required LNG terminal operators to report LNG “shipments and percentage of LNG shipped” to the Department of Energy (DOE). However, as drafted, the Proposed Modification would shift this data reporting requirement to vessel operators, requiring them to report “the amount of maritime LNG exports” to the DOE. The USTR specifically addressed this concern in the Proposed Modification. As stated in the Proposed Modification, the USTR’s stated intent behind making this revision is to “allay concerns about the provision’s impact on the US LNG sector.”

Notwithstanding this current drafting, the USTR has specifically solicited comments about shifting such reporting requirements to vessel owners, rather than vessel operators or terminal operators.

Next steps

The USTR has solicited public comments on the Proposed Modification. The scope of such submissions are expressly limited to the matters discussed in the Proposed Modifications as related to Annex III and IV and should not address further revisions to the Notice, including to Annexes I, II or V. Specifically, with reference to Annex III, the USTR has requested comments related to “the potential impact of a fee based on net tons and the suggested amount of the fee, and implications of a targeted coverage provision for the Maritime Security Program and suggested duration for such targeted coverage.” With reference to Annex IV, the USTR has requested comments related to “the potential impact of eliminating the term providing for suspension of export licenses [and] … applying data collection requirements … to vessel operators or owners, and if not, what entity is appropriate.”